PH govt could not do much in Budget 2019, lack of revenue sources (Malaysia)

The first national budget unveiled by the Pakatan Harapan (PH) government recently received mixed reactions from the public, particularly the T20 and M40 income groups that live in major cities. Economist says the 2019 Budget was very constrained by the lack of revenue and other responsibility such as debt repayment. Picture by BLOOMBERG

The first national budget unveiled by the Pakatan Harapan (PH) government recently received mixed reactions from the public, particularly the T20 and M40 income groups that live in major cities.

These groups pointed out that the 2019 Budget was not very inclusive as it only focused on the well-being for the B40 income group.

The M40 income group was experiencing depressed disposable income due to the rising cost of living in cities and slower income rises pace, they added.

Asian Strategy & Leadership Institute (ASLI) Centre of Public Policy Studies chairman Tan Sri Ramon V. Navaratnam said the PH government could not do much more in next year`s budget due to lack of revenue sources.

The government reportedly inherited debts of over RM1 trillion and other liabilities from the previous Barisan Nasional`s (BN) administration. This was further exacerbated by the abolishment of Goods and Services Tax (GST) in June this year.

"The 2019 Budget was very constrained by the lack of revenue and other responsibility such as debt repayment. The government can`t do all in one go.

"Hopefully, the fuel subsidy given will help the M40 income group. But we have to be a bit more patient to allow the government to do more. If not this time, it should be next time," he told NST Business recently.

Under the budget, the government decided that each car and motorcycle owner will enjoy up to 100 litres and 40 litres of RON95 petrol per month.

The scheme is expected to commence in the second-quarter of 2019 and is only applicable for cars of 1,500cc and below, as well as motorcycles of 125cc or less.

This will involve a subsidy of at least 30 sen per litre for about four million car owners and 2.6 million motorcycle owners, costing the government RM2 billion for 2019.

However, non-subsidised vehicles will have to pay pump prices for fuel determined on a weekly basis based on the Automatic Price Mechanism (APM).

The PH government has also put buffer on its source of revenue with the reintroduction of Sales and Services Tax (SST) in September this year.

Finance Minister Lim Guan Eng reportedly said the government would collect about RM21 billion per annum compared to RM44 billion from GST collection annually.

Lim said the rakyat would benefit RM23 billion in terms of tax savings with the implementation of SST.

He also said the government was expected to start paying the GST refund to affected business operators by next year.

Petroliam Nasional Bhd (Petronas) recently announced that it will be paying the government an additional RM30 billion in special dividend under the 2019 Budget.

This will push Petronas` total dividend commitment to RM54 billion to help the government plug in the repayment of GST and income tax refunds of RM37 billion.

The national oil company assured that the special dividend payment would not in any way impede its operations.

Navaratnam said the PH government could have taxed more in terms of wealth and estate duty taxes to enlarge its revenue. However, it seemed that the government was a bit shy to impose additional taxes for the rich.

Hence, Navaratnam said it is important for Malaysians to live within their means and they must `cut one`s coat according to one`s cloth`.

"We need more competition, meritocracy and higher productivity that can be incentivised through more modern, updated and enlightened fiscal and monetary policies and practices these policies must be more balanced and more equitable," he added.

Putra Business School senior lecturer Dr. Ahmed Razman Abdul Latiff said the incentives distribution for the B40, M40 and T20 should be refined in accordance with their disposable income for each group.

"Each group will experience different situations depending on the location they live such as the state, urban or rural areas.

"For example, the M40 group in Kelantan might get higher disposal income because the cost of living in the state is relatively low compared to those who live in city like Kuala Lumpur who are likely unable to save much as the household income is equivalent to household expenses," he said.

Ahmed Razman said incentive given for the T20 and M40 were only in a form of tax relief for the Employees Provident Fund (EPF) contribution and life insurance, up to RM7,000 from RM6,000 previously.

"However, this incentive is still not enough especially for the M40 group who live in major cities. The government should ensure these people are not burden with extreme debt, while controlling the cost of goods and services.

"The government must also intensify the adoption of the latest technology and techniques to be more efficient and effective in price monitoring such as the Price Catcher mobile application to collect information on the prices of goods and services," he added.

The government has allocated RM314.5 billion for the 2019 Budget, compared to RM290.4 billion in this year`s budget.

Of the total budget allocation for 2019, RM259.8 billion will be used for operating expenditure and RM54.7 billion for development expenditure.